Direct tax breaks for the UK videogame development sector are crucial if the industry is to grow, industry trade body Tiga has claimed.
Tiga’s own research has revealed that if the government fails to introduce a “Games Tax Relief” (GTR), the sector’s employment figure – currently estimated at just over 9000 people - will …

Key competitors and tax breaks

I would suggest that in almost every industry our foreign competitors enjoy tax advantages. Or state handouts, which is much the same thing. Or lack of enforcement of costly rules and regulations. Or no such regulations in the first place. Or cheaper fuel, which means cheaper products across the board.

The games makers haven't smelled the coffee yet. They don't understand that we aren't meant to make anything any more, we are supposed to outsource it. We are here to be taxed so our MPs can enjoy hanging baskets, bookshelves and moat cleaning. And second houses. Oh, and to bail out the incredibly wealthy but stupid and greedy bankers. So they can pump up the London house prices with their bonuses, so nobody but bankers and MPs on expense fiddles can afford them.

Sorry guys. I see your point, but you are no different today from the foundry workers of yesteryear. They just want our money.

Employment figures

Tax breaks, interesting.

Either the end customer is going to see an effect in said breaks (meaning lower prices), or the tax breaks are going to line the pockets of the CEO and board buddies, along with maybe some investors.

In the second case, this is just a disguised form of government pork, and the deal is already done even if the ink hasn't yet dried.

In the first case, if the tax breaks that are requested are made to lower the prices of games, well then what do you know ? Maybe what gamers have been clamoring for since the last decade has finally made its snail-paced way to the neuron that controls reason in the labyrinthine maze that is a game company CEO's brain these days.

Of course, I realize that under no condition will the game companies actually lower their own prices. Gotta get that new model Mercedes for next week's wife replacement. No, it is much better to complain about how taxes are punishing them so severely that they cannot compete. Meaning, "if you don't lower our taxes, we'll have to lay off some people in these hard times". I imagine that was said with a sly grin over a glass of fine Chianti in some hundred-pound-a-plate-of-noodles restaurant.

But even so, if this manipulation results in actual lowered game prices, then the consumer organizations should take that ball and drive it right back down the game company CEO's collective throats. See ! Lowered prices sell more games. SO LOWER YOUR FRAKKIN' PRICES ALREADY !

Price

A significant proportion of 'AAA' games do not make a profit - the minimum you can expect to spend now on development and marketing is around $35 million, which equates to needing to sell about 1.2 - 1.5 million copies.

Look how many games manage that: http://vgchartz.com/worldtotals.php?console=X360

Of course, there are exceptions, GTA, Call of Duty, but the most games companies are not raking it in.

That said, tax breaks would obviously be nice, but except for competing with other places that give them, I can't see much justification for them.

Translation

"We have run out of ideas and can only get investment for known franchises most of which we have already raped to death for the money they can generate. Before the well runs completely dry we would like to maximise the amount of money we make from Final Fantasy 2000 (really, is the irony in the naming of this series lost on everyone else?) therefore, please don't expect us to pay taxes before we go bust."

The response should be "Piss off and make some good games you useless shite."

Whereas the actual response will depend on the quality of the wine offered with the aforementioned £100 plate of noodles, the school that the TIGA representative went to, what clubs he was a member of whilst he was there and who daddy is.

Small factual point

@ the first AC.

The UK is slipping down the rankings quite rapidly - because most of the other big gaming nations (Canada, France, Japan and Korea or whatever) give tax breaks to the industry - they don't charge VAT on R&D for example. We wouldn't be the first, we'd just be joining the rest of the world...

Re: Price

Generally speaking a AAA developer will usually end up with around 10% of the box price for a game. Lower-rated developers will be lucky to see 5%. The retailer will see the most at around 45%. The distributer will take a small cut, say 5-10%, and the rest will go to the publisher. So, for a box sale of $50 the breakdown is something like this:

Retailer: $22.50

Distributer: $5.00

Publisher: $17.50

Developer: $5.00

If you're developing for a console, the hardware manufacturer will additionally demand a platform tax for every box sold. Exactly how much that is depends on the manufacturer and what sort of deal you can negotiate.

It is usually the publisher that covers manufacturing and marketing costs, so the developer seldom has to worry about those.

Traditionally the publisher would provide funding for the development of the game, but these days a lot of development studios obtain funding through private investors. Either way the developer will need to repay this money before they start to see any profit. So if a developer spends $20m developing a game (which is perfectly possible given how badly some people manage money and resources) they will need to shift approximately 4m boxes to break even.